High cost, low uranium prices blamed for Kintyre delay

Canadian uranium miner Cameco has blamed cost inflation in Western Australia and low uranium prices in declaring its 70 per cent Kintyre project, near Telfer on the edge of the Great Sandy Desert, uneconomic.

But the company has not given up on bringing Kintyre into production and is accelerating exploration drilling to try and identify more resources, which would improve the investment case.

Announcing its June quarter results, Cameco said a pre-feasibility study on Kintyre, one of the most advanced and largest uranium projects in WA, had not produced as strong a result as hoped.

The study found that for the project to generate the targeted returns, it needed an average realised uranium price of $US67 a pound, 34 per cent higher than the current spot price, or 62 million pounds of production over its life, as opposed to the 42 million pounds currently envisaged.

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“We’re not crossing our fingers too much [on costs coming down] because we see WA as being charged for a long time, with all the big projects going on there."

The Kintyre pre-feasibility study was based on an open-pit mine with an estimated life of seven years, producing at an average rate of six million pounds of uranium oxide a year.

Cameco was previously aiming to make a development decision on Kintyre late next year after securing the necessary state and federal approvals. First production would have then followed in 2016.

But those targets now appear unlikely to be met as the company expects to take another 18 months completing the feasibility study on the project.

Last month
BHP Billiton
chief executive Marius Kloppers indicated the company was unlikely to develop the Yeelirrie project, WA’s biggest uranium deposit, admitting that the nuclear fuel was little more than a by-product for the company.

BHP put the environmental approvals process for Yeelirrie on hold and began dismantling the project team about a year ago.

The developments with Cameco and BHP have left junior
Toro Energy
as the clear favourite to develop WA’s first uranium mine at Wiluna.

Toro is hopeful of receiving state approval for the $300 million Wiluna mine in the December quarter and expects a decision by the federal government to follow shortly after that.

The company is eager to obtain approval prior to the WA election in March next year.

At the start of 2012, new state Opposition Leader Mark McGowan said his party’s ban on uranium mining would remain in place if he came to power.

But he said he would allow mines to be built if they had already been approved.